Bombay High Court
Pride Of Asia Films vs Essel Vision on 15 December, 2003
Equivalent citations: 2004(3)ARBLR169(BOM), 2004(5)BOMCR870
Author: D.Y. Chandrachud
Bench: D.Y. Chandrachud
JUDGMENT D.Y. Chandrachud, J.
1. This Chamber Summons is to set aside a warrant of attachment of 29th May, 2003 issued in an execution proceeding arising out of what is purported to be an Arbitral Award dated 6th September, 2002. The applicant seeks a declaration that there is no executable decree or decree on Award in favour of the complainant under the Arbitration and Conciliation Act, 1996.
2. In order to appreciate the submissions which have been urged before the Court, it would be necessary to advert to the relevant facts. The claimant in the Arbitral proceeding is the complainant while the applicant in support of the Chamber Summons is the party against whom purportedly an Award is passed.
3. On 29th March, 1993, a Deed of Assignment was entered into between the applicant and the complainant by which the complainant assigned certain rights in respect of two. films in favour of the applicant. On 5th November, 2001, the complainant lodged a claim before the Film Makers Combine (FMC) seeking to recover from the applicant a total amount of Rs. 1.25 crores inter alia on account of damages for the loss of the negatives of one of the said two films by the name of "Naami Chor".
4. FMC has a complaint registration form which every complainant has to fill in. Clause 3 of the form requires the complainant to furnish details of the date of the contract, the date of expiry of contract and on "whether the contract contains a clause for Arbitration according to the Rules of FMC". These three items were filled up by the complainant with the words "N.A." (Not Applicable). The complainant stated that it was claiming compensation in the amount of Rs. 1.25 crores and the return of the Beta Tapes of two films. In paragraph 1 of the complaint, the complainant stated that it is a member of the Western India Film Producers Association, while the applicant is a member of the Indian Motion Picture Producers Association ("IMPPA"). Hence, it was stated, FMC had jurisdiction to adjudicate upon the dispute.
5. On 6th November, 2001, FMC forwarded a copy of the complaint to the applicant and while seeking comments of the applicant requested the applicant to settle the matter amicably. This was followed by a further letter dated 5th December, 2001, calling upon the applicant to expedite its reply before the complaint was referred to the relevant Committee of FMC.
6. On 9th January, 2002, a reply was addressed on behalf of the applicant to FMC. Though the merits of the reply are not particularly relevant at this stage, it may be noted that the case of the applicant was that by letters of 14th May, 1996 and 21st September, 1996, the complainant had been requested to collect the negatives of the film and by a letter dated 21st September, 1996, the laboratory concerned had also been called upon to release the negatives and U-Matics of the film. A copy of that letter was forwarded by FMC to the complainant which is turn responded by a letter dated 24th January, 2002.
7. On 7th February, 2002, Smt. Smita Thackeray as Chairperson of FMC addressed a letter to the applicant stating that the matter had been considered by the Executive Committee on 25th January, 2002 when a representative of the complainant appeared and stated that though the negatives of the film had been entrusted to the applicant, they had not been returned. The Chairperson of FMC stated that before the matter was referred to the relevant Committee for adjudication, it ought to be settled amicably. The Chairperson stated that the contention of the representative of the complainant was that he had enough evidence to show that the negative had been lost when it was with the applicant. The Chairperson called upon the applicant "in all fairness" in that case to make good the loss. On 25th March, 2002 the applicant responded to the aforesaid letter by adverting to its Advocate's letter dated 9th January, 2002 and denied its liability to make good the alleged loss of the negatives.
8. On 28th March, 2002, FMC wrote to the complainant and the applicant informing them that the complaint would be considered by a Committee of FMC "dealing with matters relating to Artists, Distributors, Exhibitors, Financiers, Labs, Studios, royalty and allied problems etc." in a meeting to be held on 10th April, 2002. On 10th April, 2002, the complainant and the applicant to the Chamber Summons signed and placed before the Committee of FMC an "undertaking" which was in the following terms :
"Now we, the undersigned parties, do hereby jointly agree to submit all our disputes, differences and claims to the Film Makers Combine for adjudication by the FMC and/or any of its Committee/Sub-Committee/ Joint Tribunal, in accordance with the Rules and Bye-laws framed by the combine for that purpose AND WE FURTHER agree and accept that the decision of the Chairman of the said Commit tee/Sub-Committee/joint Tribunal of the Film Makers Combine shall be final and binding on us and the same shall not be disputed for any reason whatsoever."
9. A meeting took place thereafter on 10th April, 2002 of the aforesaid Committee of FMC. That meeting was attended by 13 members of the Committee besides the Secretary. At that meeting, the representative of the complainant stated his case which was that the negatives of the film had been handed over to the applicant for transferring them on betacam since satellite broadcasting rights were entrusted to them and that three U-matic tapes were also handed over under a receipt which was issued by the applicant. The case of the complainant was that despite request, neither the negatives, nor the tapes came to be returned. On the other hand, the contention of the applicant was that the negatives as well as the tapes had been returned and that under the condition set out on the reverse of the receipt, the applicant was not responsible for loss or damage to the material. The Committee of FMC recorded that the representative of the applicant had not submitted any proof in support of its contention. The Committee then unanimously decided that the applicant shall pay "adequate compensation, the amount of which has to be fixed by Smt. Smita Thackeray" to the complainant as the applicant has failed to return the negatives of the motion picture. The Committee then decided that if the applicant proves that the negatives were returned, the complainant shall, however, pay an amount equal ten times the compensation so fixed to the applicant.
10. On 18th April, 2002 the complainant wrote to the Chairperson of FMC calling upon her to decide the claim for compensation in terms of the decision which had been arrived at by the Committee on 10th April, 2002. On 29th June, 2002, the applicant addressed a letter to the Secretary of FMC against the decision arrived at by the Committee on 10th April, 2002 and called upon the Committee to reconsider the decision. On 18th July, 2002, the complainant once again wrote to the chairperson of FMC calling upon her to decide the amount of compensation.
11. On 5th August, 2002, FMC issued a notice to the parties informing them that a meeting of the Committee would take place on 16th August, 2002. The applicant sought an adjournment of the meeting on the ground that its representative was unwell. Consequently, on 16th August, 2002 at the meeting of the Committee, further proceedings were adjourned to 6th September, 2002. A further meeting came to be fixed on 6th September, 2002. On 6th September, 2002, a letter on behalf of the applicant was addressed to the Secretary of FMC by an Advocate seeking a further adjournment to enable the Advocate to be prepared with the case.
12. On 6th September, 2002, the Committee assembled again. At this time ten members were present apart from the Secretary. The Committee declined to entertain the request which was made by the Advocate for the applicant recording the "as per the convention and tradition of our Committees, professional Advocates are not allowed to attend our meeting and, therefore, we need not entertain the said letter also". The applicant was absent. The Committee noted the earlier decision of 10th April, 2002 and the letter written by the applicant on 29th June, 2002 for reconsideration of the decision. The Committee was of the view that the applicant had not submitted any proof that the negative had been returned and that there was nothing new in the letter dated 29th June, 2002 which required reconsideration. The Committee thereupon directed the applicant to pay a sum of Rs. 25 lakhs to the complainant on account of compensation/damages for failure to return the negative of the film within 45 days from the date of the receipt of the decision. The decision of the Committee was communicated by its letter dated 16th September, 2002 to the applicant which was followed by a further communication dated 27th November, 2002 forwarding a copy of the decision signed by the members of the Committee.
13. Counsel appearing on behalf of the applicant has submitted before the Court that the proceedings which took place before the FMC were not Arbitral proceedings at all ; the decision which has been arrived at by the Committee on 6th September, 2002 does not constitute an Arbitral Award and that consequently, it does not have the force of a decree of the Court under the Arbitration and Conciliation Act, 1996. Counsel submitted that in order that there should be an Arbitral Award, there has to be (i) an Arbitration agreement (ii) a meeting of minds between the parties on a reference to Arbitration; and (iii) the existence of a Tribunal constituted under the provisions of the Arbitration and Conciliation Act, 1996 which decides the disputes on the basis that it is adjudicating upon differences between the parties and upon which it renders a reasoned Award. Counsel urges that the Memorandum of Association of FMC which is a company incorporated under Section 25 of the Companies Act, 1956 shows that its object is to settle disputes between the members of the company or between persons engaged in the film industry and to Arbitrate among such contesting parties. Similarly, it is urged that one of the objects is to provide for Arbitration and facilities of settlement of disputes and differences arising between the parties engaged particularly in the production sector of the film industry. A failure to comply with the directives of the combine may lead to the adoption of disciplinary proceedings which may result in a member of the association being suspended, expelled, cautioned or fined.
14. In the present case, it is urged that the undertaking which was furnished to the FMC on 10th April, 2002 cannot be regarded as an agreement to refer disputes to Arbitration. Counsel submitted that though the undertaking refers to adjudication, it does not refer to the Arbitration of disputes between the parties. Moreover, counsel submits that by the undertaking, parties have agreed that the decision of the Chairman of the Committee/Sub-Committee/Joint Tribunal shall be final and binding and that this by its nature militates against the Committee concerned being an Arbitral Tribunal. Moreover, it is urged that there is no denial in the reply to the specific averment made on affidavit that all members of the Committee are not bound to remain present at all the hearing and in fact were never present in the present case as well. In the circumstances, it has been urged that (i) the Committee of FMC does not have the attributes of an Arbitral Tribunal ; (ii) the proceedings before the Committee are not Arbitration proceedings ; (iii) the object of the Committee is to redress complaints on an informal basis which cannot be construed to be an Arbitration under the provisions of the Act; and (iv) the proceedings of the Committee are in fact not conducted in a judicial manner. In sum and substance, therefore, the submission is that there is no decree which is executable in law since there is no Arbitral Award which is enforceable as a decree under Section 36 of the Act.
15. In reply to these submissions, counsel appearing on behalf of the complainant has relied upon the provisions contained in Clauses 1, 25 and 49 of the Memorandum of FMC and upon Clause 14 of the Articles of Association which obligates all members to implement the directives, decisions, rules and regulations which may be adopted or formulated by the company. Counsel urged that in the present case Clause 16 of the Deed of Assignment dated 29th March, 1993, does incorporate an Arbitration agreement by which parties have agreed to refer their disputes and differences to Arbitration in accordance with the Arbitration Act then in force. Counsel submitted that the complaint which was filed by the complainant specifically stipulated that the combine has jurisdiction to adjudicate upon the disputes since the complainant was a member of the Western India Film Producers Association while the applicant was a member of IMPPA. After the complaint was submitted, FMC called upon the parties initially to settle their disputes and after that was not possible, a reference to adjudication came to be made. Counsel urged that the applicant participated in the proceedings before the Committee which ultimately culminated in an Award of the Arbitral Tribunal dated 6th September, 2002. There was no challenge to the Arbitral Award under Section 34 of the Act and it is hence not open to the applicant to raise a dispute in the course of execution proceedings.
16. In considering the tenability of the chamber summons, the Court must, at the outset, have due regard to the position that the jurisdiction which is exercised in the present case is circumscribed by Section 47 of the Code of Civil Procedure 1908. Under Section 47, all questions arising between the parties to a suit in which a decree was passed or their representatives and relating to the execution, discharge or satisfaction of the decree have to be determined by the Court executing the decree and not by a separate suit. Since the decision of the Supreme Court in Kiran Singh v. Chaman Paswan, , it is a settled principle of law that a decree passed by a Court without jurisdiction is a nullity and that its invalidity can be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, it has been held, whether it is pecuniary or territorial or whether it is respect of the subject matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties.
17. In the present case, execution proceedings have been instituted for the enforcement of what according to the complainant is an Arbitral Award. Section 36 of the Arbitration and Conciliation Act, 1996, ("the Act") provides that where the time for making an application to set aside the Arbitral Award under Section 34 has expired or upon such an application having been made, it has been refused, the Award shall be enforced under the Code of Civil Procedure, 1908, in the same manner as it were a decree of the Court. The submission which has been urged before the Court is that the execution application in the present case must fail for the reason that what is sought to be enforced in the execution proceedings is not an Arbitral Award. The submission is that there was no agreement between the parties to refer that differences to Arbitration by FMC on the basis of which it can be held that the Committee of FMC proceeded to Arbitrate upon the matter. If there was no agreement between the parties to refer the dispute which arose by and between them to the FMC or to a Committee thereof as an Arbitral Tribunal, then clearly, the applicant is entitled to succeed for than there would essentially be no Arbitral Award which can be enforced as a decree of the Court. The matter, therefore, has to be examined from two perspectives. The first is the submission of the applicant that there was no Arbitration agreement between the parties to refer their disputes to Arbitration of FMC or its Committee. The second is that in any event, the proceedings which took place in pursuance of the undertaking that was filed by the parties were not Arbitral proceedings within the meaning of the Act, and there is no Arbitral Award which has the force of a decree of the Court. The nature of the undertaking and the manner in which the Committee proceeds militates against actions fundamental to the law about the conduct of proceedings in relation to Arbitration.
18. The proceedings between the parties were initiated by the complainant filing a complaint on 5th November, 2001 before the Film Makers Combine. While filing the complaint, one of the issues on which a declaration was sought was whether the contract contained a clause for Arbitration according to the Rules of FMC. The complainant's answer to this was that the query was not applicable. The complainant stated in the body of the complaint that it is a member of the Western India Film Producers Association whereas, the applicant is a member of IMPPA. Hence, it was contended that FMC has jurisdiction to adjudicate upon the dispute. After the complaint was filed, FMC initially called upon the parties to resolve their disputes amicably. Eventually since this was not possible parties were informed on 28th March, 2002 that the complaint would be considered by a Committee of the combine dealing with matters relating to artists, distributors, exhibitors, financiers, film laboratories, royalty and allied problems, etc.
19. On 10th April, 2002 parties submitted a joint undertaking to the combine. The undertaking states that it is in the matter of an adjudication of disputes between the complainant and the applicant in relation to the film "Naami Chor" and that since disputes and differences had arisen between the parties, it has been agreed jointly to submit them for adjudication by FMC "and/or its Committee/Sub-Committee/Joint Tribunal in accordance with rules and bye-laws framed by the combine for that purpose". Parties further agreed that "the decision of the Chairman of the said Committee/Sub-Committee/Joint Tribunal of the Film Makers Combine shall be final and binding". The undertaking which was filed by the parties before FMC refers to the existence of differences and disputes and to the agreement of parties to submit them for adjudication. However, what follows thereafter the statement that the decision of the Chairman of the Committee/Sub-Committee/Joint Tribunal shall be final and binding and shall not be disputed for any reason whatsoever.
20. In this background it would be necessary to refer to some of the relevant provisions of the Arbitration and Conciliation Act, 1996. Section 2(a) of the Act defines "Arbitration" as any Arbitration whether or not administered by a permanent Arbitral institution. Section 2(c) defines the expression "Arbitration agreement" to mean an agreement referred to in Section 7. An "Arbitral Award" is defined by Section 2(c) to include an interim Award. An "Arbitral Tribunal" is defined by Section 2(d) to mean a sole Arbitrator or a panel of Arbitrators. Section 7(1) defines the expression "Arbitration agreement" to mean an agreement by the parties to submit to Arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not. Sub-section (2) of Section 7 provides that an Arbitration agreement may be in the form of an Arbitration clause in a contract or in the form of a separate agreement. Under Sub-section (4) an Arbitration agreement is stated to be in writing if it is contained in a document signed by the parties ; in an exchange of letters or in an exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
21. The deed of assignment which was executed between the parties on 29th March, 1993 contains a provision for a reference of disputes to Arbitration. Clause 16 of the Deed of Assignment provides that any disputes between the parties regarding any of the clauses of the agreement shall be referred to Arbitration of such person as the parties may mutually agree upon and shall be decided in accordance with the provisions of the Indian Arbitration Act then in force. During the course of submissions it has been urged on behalf of the complainant that the reference which was made to the Committee of FMC was a reference in terms of Clause 16 of the Deed of Assignment. This submission cannot be accepted for the simple reason that it is directly contrary to what is asserted in the affidavit in reply to the chamber summons. In paragraph 10(c) of the reply, there is the following averment :
"c. Alter notice of the said complaint was given by the said Film Makers Combine to thg applicants, the applicants and I signed an Arbitration agreement for submission of all our disputes, differences and claims to the said film makers combine for adjudication by the said Film Makers Combine and/or any of its Committee/Sub-Committee/ Joint Tribunal, by a writing dated 10th April, 2002, which however, has been deliberately suppressed from this Hon'ble Court by the applicants, a copy whereof is hereto annexed and marked Exhibit "2"."
Then in paragraph 11 (a) of the reply what is stated is thus :
"a. The said writing, Exhibit "2" hereto, contains and constitutes an Arbitration agreement."
A similar averment has been made in paragraph 17 of the reply which is as follows :
"In any event I submit that Arbitration proceedings were resorted to by me and the applicants and commenced before the Committee in pursuance of the said complaint, Exhibit "G" to the said affidavit and the said writing, Exhibit "2" hereto."
22. Thus, the case of the complainant on affidavit is that the alleged Arbitration agreement in pursuance of which FMC adjudicated upon the matter is that which was embodied in the undertaking which came to be furnished on 10th April, 2002. Evidently the case of the complainant on affidavit is not that the provisions of Clause 16 of the Deed of Assignment were invoked. Quite correctly, no such contention has been raised for the simple reason that there was, in fact, no invocation of the Arbitration agreement contained in Clause 16 of the Deed of Assignment, nor was any recourse to the remedies provided by Section 11 of the Act taken in the facts of the present case. Instead, what the complainant did was to move the FMC by lodging a complaint in the course of which an undertaking as noted earlier came to be filed.
23. The undertaking which was furnished on 10th April, 2002 provides that parties agree and accept that the decision of the Chairman of the Committee/Sub-Committee/Joint Tribunal of FMC shall be final and binding on them. Parties agreed to submit their disputes, differences and claims for adjudication in accordance with the Rules and Bye-laws framed by the combine. Now it is an admitted position that there are no Rules and Bye-laws. Counsel appearing on behalf of the complainant states that the only rules are the provisions of the Article of Association. There is to my mind a far more fundamental reason why a provision of the kind contained in the undertaking of 10th April, 2002 cannot constitute an Arbitration agreement. A provision to the effect that the parties would accept the decision of the Chairman of a Committee or Sub-Committee as final and binding cannot be regarded as constituting an agreement to refer disputes to Arbitration. The very essence of an Arbitration, as indeed of a judicial proceeding, is, a decision of all the Arbitrators should there be an agreed determination or a decision of a majority of them if there be a disagreement. A situation wherein disputing parties would be bound not by a decision of a panel of Arbitrators, but by a decision of one of them is fundamentally inconsistent with the nature of the judicial process. The undertaking that was furnished on 10th April, 2002 is in terms of what it requires to be submitted in all such cases. The undertaking relegates each member of the Committee to an inconsequential position bordering on irrelevance. For, parties are to be bound by the decision of the Chairman irrespective of what views individual members of the Committee may hold. There are basic notions which the common law holds dear for they constitute values that lie at the core of a judicial or arbitrary process that is fair. Those notions will have to be cast to the winds by holding that the undertaking constituted a reference to Arbitration. Structured as my discretion is by principle and precedent, I decline to so regard what has taken place as an Arbitral proceedings.
24. The clause in the undertaking submitting parties to the decision of the Chairman of the Committee/Sub-Committee/Joint Tribunal, as the case may be, is amplified by what in fact took place in the course of the proceedings in the present case. In the meeting which was held on 10th April, 2002, the members of the Committee who were then present, decided that unless the applicant proved that the negative of the film was returned to the complainant, it would have to pay adequate compensation. The amount of compensation was to be determined not on the basis of the evidence adduced before the Committee, but would be "fixed" by Smt. Smita Thackeray. Whether that term was used by accident or design, its connotations are not consistent with justice and fairness. It is inconceivable in a judicial or Arbitral proceeding that an Award for damages should be based not upon the evidence adduced during the course of the proceeding but upon the ipse dixit of a third party, in the present case one who happens to be the Chairman of the Film Makers Combine. The Committee then decided that in the event the applicant proved that the negative had in fact, been returned, then in that event the complainant shall pay to the applicant an amount equal to ten times the compensation "so fixed", meaning so fixed by the Chairperson. This being the manner in which the undertaking to abide by the decision of the Chairman has been worked out by the Committee of FMC, it is completely an antithesis of fair Arbitral process. Beside this, a perusal of the minutes of the meeting of the Committee of FMC which have been in the course of the hearing would show that at the meeting held on 10th April, 2002, 13 members of the Committee excluding the Secretary were present. At the next meeting which was held on 16th August, 2002, 18 members of the Committee were present excluding the Secretary. Finally, at the meeting which was held on 6th September, 2002, ten members were present apart from the Secretary. Two of the members present at the meeting of 6th September, 2002 are reflected in the minutes to be special invitees. These facts have been adverted to because all of them demonstrate that what has taken place before the FMC in the present case can never be regarded as an Arbitral proceeding.
25. The issues which have arisen for consideration in the present case are similar to the questions which came up for consideration before a Bench of two learned Judges of the Supreme Court in K.K. Modi v. K.N. Modi, . In that case one of the issues before the Court was whether Clause 9 of a Memorandum of Understanding dated 24th January, 1989 constituted an Arbitration agreement and whether the decision of the Chairman of the IFCI was an Arbitral Award. The Supreme Court adverted to the treatise as was till and Hoyd on Commercial Arbitration and noted that apart from Arbitral Tribunals, there are other Tribunals with a consensual jurisdiction whose decisions are intended to affect the private rights of two parties inter se, but not in a manner which creates a legally enforceable remedy. Examples of such Tribunals, are Tribunals of local religious communities or persons privately appointed to act as mediators between two disputing persons or groups. The Supreme Court formulated the attributes which must be present in an Arbitration agreement and these are as follows :
"(1) The Arbitration agreement must contemplate that the decision of the Tribunal will be binding on the parties to the agreement.
(2) That the jurisdiction of the Tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or from a statute, the terms to which make it clear, that the process is to be an Arbitration.
(3) The agreement must contemplate that substantive rights of parties will be determined by the agreed Tribunal.
(4) That the Tribunal will determine the rights of the parties in an impartial and judicial manner with the Tribunal owing an equal obligation for fairness towards both sides.
(5) That the agreement of the parties to refer their disputes to the decision of the Tribunal must be intended to be enforceable in law and lastly.
(6) The agreement must contemplate that the Tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the Tribunal."
26. The other factors which the Supreme Court held to be relevant include (i) whether the agreement contemplated that the Tribunal will receive evidence from both sides and hear their contentions or at least give the parties an opportunity to put them forward ; (ii) whether the wording of the agreement is consistent or inconsistent with the view that the process was intended to be an Arbitration ; and (iii) whether the agreement requires the Tribunal to decide the dispute according to law. The Supreme Court also adverted to the well known distinction between the decision of an Arbitral Tribunal and the decision of a mere expert. An Arbitral Tribunal arrives at its decision on the basis of the evidence and submissions of the parties and must apply the law or if the parties agree, other considerations ; an expert, unless it is agreed otherwise, makes his own enquiries, applies his own expertise and decides on his own expert opinion. The essence of an Arbitral proceeding, therefore, is that it is a forum which is chosen by the parties with an intention that it must act judicially after taking into account relevant evidence before it and the submissions of the parties. The Supreme Court held that the proceedings before the Chairman of IFCI were not Arbitral proceedings :
"Undoubtedly, in the course of correspondence exchanged by various members of Groups A and B with the Chairman, IFCI, some of the members have used the words "Arbitration" in connection with Clause 9. That by itself, however, is not conclusive. The intention of the parties was not to have any judicial determination on the basis of evidence led before the Chairman, IFCI. Nor was the Chairman, IFCI required to base his decision only on the material placed before him by the parties and their submissions. He was free to make his own inquiries. He was free to take the help of other experts. He was required to decide the question of valuation and the division of assets as an expert and not as an Arbitrator. He has been authorised to nominate another in his place. But the contract indicates that he has to nominate an expert. The fact that submissions were made before the Chairman, IFCI would not turn the decision-making process into an Arbitration."
27. In a subsequent decision in Bharat Bhushan Bansal v. U.P. Small Industries Corporation Ltd., , Clause 23 of Civil Engineering Contract provided that the decision of the Managing Director of the Small Industries Corporation shall be conclusive and binding on both the parties to the contract upon all questions relating to any claim, right, matter or thing in any way arising out of or relating to the contract and in respect of all other matters arising out of the contract and not specifically mentioned in the said clause, holding that Clause 24 does not constitute an Arbitration agreement, the Supreme Court observed thus :
"Clause 24 does not mention that any dispute can be referred to the Arbitration of the Managing Director. Clause 24 also does not spell out any duty on the part of the Managing Director to record evidence or to hear both parties before deciding the questions before him. From the wording of Clause 24, it is difficult to spell out any intention of the parties to leave any disputes to the adjudication of the Managing Director of respondent as an Arbitrator."
28. Applying this test to the case in hand, it is impossible to come to the conclusion that the undertaking which was furnished by the parties on 10th April, 2002, constitutes an Arbitration agreement or an agreement to refer their disputes to Arbitration. The terms of the undertaking do not make it clear that the process which the parties have agreed upon is an Arbitration. The undertaking refers to an adjudication by a Committee/Sub-Committee/ Joint Tribunal of FMC in accordance with Rules and Bye-laws. There are no Rules and Bye-laws apart from the Articles of Association. The undertaking does not implicate a duty on the part of the Committee/Sub-Committee/Joint Tribunal to decide judicially in an impartial and objective manner and in accordance with law. On the contrary what the undertaking specifies is that the decision of the Chairman of the Committee/Sub-Committee/Joint Tribunal would be final and binding upon the parties. The agreement does not specify that the Committee will receive evidence from both the sides or that it will decide the dispute in accordance with law. What has in fact transpired before the Tribunal is reflective of what was always implicit in the nature of the undertaking which was furnished. Parties never intended that the undertaking would constitute an agreement to Arbitrate ; an Arbitration that would take place by following norms of judicial procedure ; a decision which would be arrived at on the basis of evidence and in accordance with law and an outcome which is enforceable as an Arbitral Award. Their participation in the proceedings before the Committee cannot, therefore, be regarded as a participation in an Arbitral proceeding that would culminate in an Arbitral Award.
29. The memorandum of FMC provides as one of its objects that the association is to settle disputes between the members of the affiliate of the company or between persons engaged in the film industry and to arbitrate amongst such contesting parties. Clauses 25 similarly, Clause 49 of the objects (sic) the combine to provide Arbitration and other facilities for the settlement of disputes and differences arising between parties engaged in the production sector in particular and the Film Industry in general. Neither Clause 25 nor Clause 49 can be construed as an Arbitration agreement of an agreement to refer disputes to Arbitration. Clauses 25 and 49 are general provisions amplifying the objects of the Film Makers Combine. FMC may well enforce a decision by subjecting a member who is found to be in breach of its directives or decisions to disciplinary action. That is how Clause 15 of Articles of Association, for instance, provides that a member, delegate or film producer being a member of Association of the Company may be cautioned, fined suspended or expelled or denied facilities upon failure to implement the directions, decisions, rules and regulations of the company. The Court is not concerned with the exercise of the disciplinary jurisdiction of the Film Makers Combine.
30. In the present case, for the reasons already indicated I am of the view that the decision which has been arrived at by the Film Makers Combine does not have the force of decree of the Court. There was no Arbitration agreement between parties to refer their disputes to Arbitration by FMC. There was in fact no Arbitral proceeding. There is in fact, no Arbitral Award within the meaning of the Arbitration and Conciliation Act, 1996. The Chamber summons thus, has to be made absolute and is accordingly made absolute in terms of prayer Clauses (a), (b) and (c).
31. In pursuance of an ad interim order dated 9th July, 2003, the office was directed to accept a demand draft in the amount of Rs. 26 lakhs on the part of the applicant, which was to remain in deposit in the Court till the Chamber Summons was finally disposed of. Having regard to the conclusion which has been arrived at in the present judgment, the applicant will be at liberty to withdraw the amount so deposited.
32. On the request of learned counsel appearing on behalf of the complainant, who seeks some reasonable time for the complainant to expounds its remedies in appeal, there shall be a direction to the effect that the applicant shall not withdraw the amount of Rs. 26 lakhs which has been deposited in this Court until 31st January, 2004. In, the meantime by consent the Prothonotary and Senior Maser is directed to invest the amount so deposited in any fixed deposit of a nationalised bank for a period of six weeks from today.
33. Parties be given copies of this order only authenticated by the Associate/Personal Secretary of this Court.